“The Nightmare Scenario” And Everything Else: The Full French Election Matrix
by Tyler Durden
Apr 20, 2017
Yesterday, we presented a Deutsche Bank research report which tried to evaluate whether, despite polls suggesting otherwise, a Le Pen-Melenchon first round victory was possible in the French election this coming Sunday. In a surprising break from the conventional wisdom, this is what DB concluded:
Melenchon’s rise in the polls has been one of the key market drivers since the end of March. Further decline in Hamon’s votes is unlikely to support Melenchon to the same extent as it did in the last three weeks. However, the more important point is that the risk around the first round persists as (a) the top 4 candidates are within the historical margin of error and (b) the high level of undecided voters increases the uncertainty of the outcome.
Why so much attention on Le Pen-Melenchon? Because as the WSJ wrote this morning, “with the start of the French election just days away, investors are contemplating their nightmare scenario: a choice between far-left and far-right candidates. In recent days, a surge in opinion polls has placed Jean-Luc Mélenchon, a left-wing firebrand who promises higher wages and fewer working hours, as a potential candidate to move past this Sunday’s first round of voting. That could set up a second-round vote in May 7 with Marine Le Pen, an economic nationalist who wants to pull France out of the euro.”